Intellectual Property Law Patents in an Environment of Global Collaboration Pryor Garnett Senior Counsel, Patent Strategy IBM Corporation Intellectual Property & Entrepreneurship Berkeley Center for Law & Technology University of California, School of Law March 8, 2008 Berkeley, California 2007 IBM Corporation
The World is Changing Rapidly Globalization, commoditization and innovation acceleration are unstoppable forces New challengers: Asia-Pacific, Eastern Europe, Latin America, Brazil, Russia, India, China ("BRIC") GDP growth forecast: A-P 4.9%, US 3.6%, EU 1.3%. Services dominate GDP. More than a billion Internet users Innovation is what is going to differentiate businesses and national economies 2
Collaboration Stimulates Innovation IBM shares patents, inventions, processes, and know-how Open Source Communities Open Standards Committees Global Innovation Outlook with Government, University, and Business Leaders Open Patents EcoPatent Commons 3
The Nature of Innovation Itself is Changing It s occurring more rapidly It s more open, global and requires wider collaboration across multiple disciplines, specialties and borders often involving cultural diversity and language Concepts of intellectual property ownership are giving way to a more enlightened emphasis on intellectual capital, sharing and collaboration. It requires a broader view of the elements a company should look for in... a partner a competitor an intellectual property strategy 4
IBM Global Technology Outlook ƒidentify Emerging Technology Trends Significant to IBM and Competitors Disruptive to Existing Business, Potential New Ones, Game Changers Exponentials - Thresholds How New Technology can Impact Customers (and Our Businesses) Understand Major Customer Challenges by Industry Segment ƒinfluence Technical Strategy of the Company Make Sure the Company is Focused on Major Opportunities For New Growth ƒsource of Education For the CEO & Senior VPs 5
Global Innovation Outlook Objectives Uncover new insights and opportunities that will shape business and society Accelerate the integration of best world thinkers in technology creation and strategic business design Demonstrate to key constituencies the competitive advantage created by collaboration among a global ecosystem GIO 1 Focus Areas Healthcare Government GIO 2 Focus Areas Future of the Enterprise Designing the 21st century corporation; managing global talent and skills; the global small business Transportation Mega-urban centers and smart traffic management; the connected vehicle; customs, ports and border control The Environment Eco-efficient technologies; economic impact of access to clean water supplies; predictive environmental impact services Work/Life 6
IP is Central to Economic Growth & Competition US investment in intangible assets (>$1T/year) equivalent to investment in tangibles % of GDP 14 Intellectual property is the backbone of America's economy U.S. Commerce Secretary Carlos Gutierrez 12 Tangibles Japan intends to bring about a nation founded on intellectual property 10 Japanese Prime Minister Junichiro Koizumi 8 Intangibles 6 The competition of the future world is a competition for Intellectual Property Rights 4 Chinese Premier Wen Jiabao 2 ~80% of the value of modern companies comes from intangible assets 0 1954 1964 1974 1984 1994 2004 Sources: US Federal Reserve Nakamura, Ned Davis Research 7
IP Drives Profitability, Growth, Competitive Advantage Marketshare Price Innovation Distinction Cost Intellectual Property Ownership Sustainable Profitability Direct Income Influence 8
More/Stronger Patents = More Innovation? 9
Top Defendants in US Patent Litigation # Suits, 2006-2007 Microsoft (43) Verizon (29) Target (28) Dell (28) Wal-Mart (24) HP (24) Apple (23) Motorola (20) Sprint Nextel (20) AT&T (19) Source: Troll Tracker, December, 2007 10
Plaintiffs in US Patent Litigation 2006-2007 = Non-Practicing Entities 26% of overall infringement suits 50% of infringement suits against large companies 3 months in late 2007 80% of infringement suits against large technology and financial companies Source: Troll Tracker, December, 2007 11
The Impact of Patent System Imbalance We estimate that the deadweight loss of a loose patent system from lost innovation is approximately $21 billion each year in private costs alone, or nearly $200 per household per year. This sizeable deadweight loss constitutes approximately 7% of annual R&D spending in the United States. Ford, Koutsky, and Spivak, Quantifying the Costs of Substandard Patents: Some Preliminary Evidence, Phoenix Center Policy Paper Series, September, 2007 12
Sources of Patent System Imbalance Inventive step / nonobviousness test Patentable subject matter Damages proportionality These (and others) are determinants of national technology and industrial policy 13
Goldilocks and the Trilateral Patent Offices Too loose? Too tight? Just right? 14
Inventive Step / Nonobviousness Determines the quality of patents granted Affects the number of patents granted and enforced Quality too high / number too low patents are too difficult to obtain This discourages investment in R&D, and reduces invention creation Quality too low / number too high too many patents are enforced / asserted Patent speculators extract unjustified payments from producers This discourages investment in production, and reduces the application of inventions to real problems 15
Patentable Subject Matter Determines the technologies affected by patents Affects the number of patents granted and enforced Problems with patent office and court assessments of inventive step / nonobviousness of software-related inventions, especially the non-technical ones, are cited to justify abolishing all patents on subject matter relevant to software... or all patents... or all intellectual property 16
Patent Damages Proportionality Affects the number of patents enforced Determines the effect of patents on producers Plaintiff #1 "A reasonable royalty is 5%." #2 "ditto" #s 3-10 "us too" N "what about me" N royalty revenue = Chapter 11 π =1... at least in in the domain of information technology products and services 17
Thank You 18